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Political Women's Group Denied Exemption

APR. 12, 2018

LTR 201827013

DATED APR. 12, 2018
DOCUMENT ATTRIBUTES
  • Institutional Authors
    Internal Revenue Service
  • Code Sections
  • Subject Area/Tax Topics
  • Industry Groups
    Nonprofit sector
  • Jurisdictions
  • Tax Analysts Document Number
    2018-28111
  • Tax Analysts Electronic Citation
    2018 TNT 131-21
    2018 EOR 8-23
  • Magazine Citation
    The Exempt Organization Tax Review, July 2018, p. 147
    82 Exempt Org. Tax Rev. 147 (2018)
Citations: LTR 201827013

Contact person/ID number: * * *
Contact telephone number: * * *

UIL: 501.00-00, 501.03-04
Release Date: 7/6/2018

Date: April 12, 2018

Employer ID number: * * *

Form you must file: * * *

Tax years: * * *

Dear * * *:

This letter is our final determination that you don't qualify for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code (the Code). Recently, we sent you a proposed adverse determination in response to your application. The proposed adverse determination explained the facts, law, and basis for our conclusion, and it gave you 30 days to file a protest. Because we didn't receive a protest within the required 30 days, the proposed determination is now final.

Because you don't qualify as a tax-exempt organization under Section 501(c)(3) of the Code, donors can't deduct contributions to you under Section 170 of the Code. You must file federal income tax returns for the tax years listed at the top of this letter using the required form (also listed at the top of this letter) within 30 days of this letter unless you request an extension of time to file.

We'll make this final adverse determination letter and the proposed adverse determination letter available for public inspection (as required under Section 6110 of the Code) after deleting certain identifying information. Please read the enclosed Notice 437, Notice of Intention to Disclose, and review the two attached letters that show our proposed deletions. If you disagree with our proposed deletions, follow the instructions in the Notice 437 on how to notify us. If you agree with our deletions, you don't need to take any further action.

We'll also notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed determination letter (under Section 6104(c) of the Code). You should contact your state officials if you have questions about how this determination will affect your state responsibilities and requirements.

If you have questions about this letter, you can contact the person listed at the top of this letter. If you have questions about your federal income tax status and responsibilities, call our customer service number at 1-800-829-1040 (TTY 1-800-829-4933 for deaf or hard of hearing) or customer service for businesses at 1-800-829-4933.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosures:
Notice 437
Redacted Letter 4036, Proposed Adverse Determination Under IRC Section 501(c)(3)
Redacted Letter 4038, Final Adverse Determination Under IRC Section 501(c)(3) — No Protest


Contact person/ID number: * * *
Contact telephone number: * * *
Contact fax number: * * *

UIL: 501.00-00, 501.03-04

Date: February 8, 2018

Employer ID number: * * * 

LEGEND:

C = Year
D = Date
E = Political party

Dear * * *:

We considered your application for recognition of exemption from federal income tax under Section 501(a) of the Internal Revenue Code (the Code). Based on the information provided, we determined that you don't qualify for exemption under Section 501(c)(3) of the Code. This letter explains the basis for our conclusion. Please keep it for your records.

Issues

Do you qualify for exemption under Section 501(c)(3) of the Code? No, for the reasons stated below.

Facts

You are an unincorporated association and assert that you were originally formed around C, but you did not provide a copy of your original organizing document. However, you provided a copy of your amended Bylaws that were signed and dated on D. Your amended Bylaws state that your purpose is:

  • To encourage effective political activity

  • To educate your members and to inform and be informed about the issues facing society

  • To encourage the development of qualified women candidates for public office, and the participation of women in all phases of governmental activity, and

  • To encourage participation in activities which enhance the community, the environment and which will increase the development of and the community at large.

Your Bylaws further state that you will be active in the general, municipal and special elections on behalf of such candidates who have been nominated either by primary election, nominating convention or substituted nomination. Your purpose is to encourage and to help women take a more vital role in the electoral process, not to publicly endorse candidates in primary elections. You will encourage effective political leadership by educating your members and being informed about issues facing society.

Your Bylaws further state that your officers and members shall be active voters of the E political party. The required Section 501(c)(3) language regarding your purpose and dissolution is not included.

When asked about possible political activities eluded to in your Bylaws, you asserted that you are a charitable organization. You provided examples of some of the charitable work you do, such as making donations to other charities. You also said that you do not endorse any candidates and you invite all candidates to speak to your membership. According to your Bylaws, your officers and members must be members of the E political party. Despite this fact, you said that you do not support any political candidate or political party.

You provided an amendment to your Bylaws which states that you have formed cluster groups to reach all registered E women of your city throughout the metropolitan area. The cluster groups will be comprised of registered E women from all wards and divisions. The purpose of the cluster groups is to encourage all registered E women in your city to take an active part in political issues facing society and the E party to gain a better understanding of the political issues and process of the E party. The amendment was brief and only discussed the idea of cluster groups.

Later you provided another an amendment to your Bylaws which states that you do not support or endorse any political candidates. It is noteworthy that you again did not provide a full copy of your amended Bylaws; rather, you submitted an attachment to the original Bylaws which didn't say that it was amending any particular section of the original. It also didn't remove references to potential political activities from the first copy of the Bylaws you submitted.

Despite two written requests, you did not provide a copy of your original organizing document. Also, despite multiple requests, potentially disqualifying language was not removed from your Bylaws and the required Section 501(c)(3) language was not added regarding the purpose and dissolution.

Law

Section 501(c)(3) of the Code provides for the recognition of exemption of organizations that are organized and operated exclusively for religious, charitable or other purposes as specified in the statute. No part of the net earnings may inure to the benefit of any private shareholder or individual.

Treasury Regulation Section 1.501(c)(3)-1(a)(1) states that, in order to be exempt as an organization described in Section 501(c)(3) of the Code, an organization must be both organized and operated exclusively for one or more of the purposes specified in such section. If an organization fails to meet either the organizational test or the operational test, it is not exempt.

Treas. Reg. Section 1.501(c)(3)-1(b)(1)(i) provides that an organization is organized exclusively for one or more exempt purposes only if its articles of organization:

(a) Limit the purposes of such organization to one or more exempt purposes; and

(b) Do not expressly empower the organization engage, otherwise than as an insubstantial part of its activities, in activities that in themselves are not in furtherance of one or more exempt purposes.

Treas. Reg. Section 1.501(c)(3)-1(b)(4) holds that an organization is not organized exclusively for one or more exempt purposes unless its assets are dedicated to an exempt purpose. An organization's assets will be considered dedicated to an exempt purpose, for example, if, upon dissolution, such assets would, by reason of a provision in the organization's articles or operation of law, be distributed for one or more exempt purposes.

Revenue Procedure 2018-5, 2018-1 I.R.B. 233, Section 3 states that a determination letter or ruling on exempt status is issued based solely upon the facts and representations contained in the administrative record. The applicant is responsible for the accuracy of any factual representations contained in the application. Section 6 (and its predecessors) provides that a favorable determination letter or ruling will be issued to an organization only if its application and supporting documents establish that it meets the particular requirements of the section under which exemption from federal income tax is claimed.

In Universal Life Church v. United States, 372 F. Supp. 770 (E.D. Cal. 1974), the court concluded that “one seeking a tax exemption has the burden of establishing his right to a tax-exempt status.”

Pius XII Academy, Inc. v. Commissioner, T.C. Memo. 1982-97, affd. 711 F.2d 1058 (6th Cir. 1983), provides that an organization must establish through the administrative record that it operates as an exempt organization. Denial of exemption may be based solely upon failure to provide information describing in adequate detail how the operational test will be met.

In La Verdad v. Commissioner, 82 T.C. 215 (1984), the administrative record did not demonstrate that the organization would operate exclusively in furtherance of an exempt purpose. Therefore, denial of organization's request for tax-exempt status was reasonable.

New Dynamics Foundation v. United States, 70 Fed. Cl. 782 (2006), was an action for declaratory judgment that the petitioner brought to challenge the denial of his application for exempt status. The court, in finding that the actual purposes displayed in the administrative record supported the Service's denial, stated “It is well-accepted that, in initial qualification cases such as this, gaps in the administrative record are resolved against the applicant.” The court noted that if the petitioner had evidence that contradicted these findings, it should have submitted it as part of the administrative process. The court also highlighted the principle that exemptions from income tax are matters of legislative grace.

Ohio Disability Association v. Commissioner, T.C. Memo 2009-261 (2009), states denial is justified because responses to requests for additional information failed to supplement the initial application or clarify purposes and activities, and generalizations did not provide sufficient detail to determine that the organization would be operated exclusively for exempt purposes.

Application of law

A ruling on exempt status is based solely on facts and representations in the administrative file. You have not provided supporting documentation to establish you meet the requirements of Section 501(c)(3) of the Code. Section 501(c)(3) sets forth two main tests for qualification for exempt status. As stated in Treas. Reg. 1.501(c)(3)-1(a)(1), an organization must be both organized and operated exclusively for purposes described in Section 501(c)(3).

You did not provide a copy of your initial organizing document. Your amended Bylaws do not limit your purpose to one or more exempt purposes or dedicate your assets to an exempt purpose upon your dissolution. As a result, you have not satisfied the organizational test described in Treas. Reg. Sections 1.501(c)(3)-1(b)(1)(i) and Treas. Reg. Section 1.501(c)(3)-1(b)(4).

You did not provide us with a copy of your initial organizing document. The subsequent copy of your amended organizing documents did not limit the purposes of your organization to one or more exempt purposes or indicate that your assets are dedicated to an exempt purpose. Therefore, there is not sufficient documentation to establish that you are exempt from taxation as required by Section 501(c)(3) of the Code and Rev. Proc. 2018-5. As in Universal Life Church, you have the burden of establishing that you qualify for tax exemption.

In Pius XII Academy, Inc., La Verdad, and New Dynamics Foundation, it was established that an organization must establish, through its administrative record, that it meets the requirements for exemption. Because you failed to provide sufficient details in your initial application and the additional documentation you provided did not meet the statutory and regulatory requirements for exemption, you have not established that you meet the requirements for exemption under Section 501(c)(3) of the Code. As provided in New Dynamics Foundation, any gaps in the administrative record will be resolved against the applicant. Similarly, in Ohio Disability Association, the court found that even when additional information was provided, but it contained generalizations and failed to clarify purposes, denial is justified. You did not provide supplemental information; therefore, we are unable to determine that you qualify for exemption.

Conclusion

Based on the information submitted, you have failed to establish that you are organized exclusively for exempt purposes within the meaning of Section 501(c)(3) of the Code and the related income tax regulations.

Therefore, based on the administrative record, you fail to qualify for exemption under Section 501(c)(3).

If you don't agree

You have a right to file a protest if you don't agree with our proposed adverse determination. To do so, you must send a statement to us within 30 days of the date of this letter. The statement must include:

  • Your name, address, employer identification number (EIN), and a daytime phone number

  • A copy of this letter highlighting the findings you disagree with

  • An explanation of why you disagree, including any supporting documents

  • The law or authority, if any, you are relying on

  • The signature of an officer, director, trustee, or other official who is authorized to sign for the organization, or your authorized representative

  • One of the following declarations:

For an officer, director, trustee, or other official who is authorized to sign for the organization:

Under penalties of perjury, I declare that I examined this protest statement, including accompanying documents, and to the best of my knowledge and belief, the statement contains all relevant facts and such facts are true, correct, and complete.

For authorized representatives:

Under penalties of perjury, I declare that I prepared this protest statement, including accompanying documents, and to the best of my knowledge and belief, the statement contains all relevant facts and such facts are true, correct, and complete. 

Your representative (attorney, certified public accountant, or other individual enrolled to practice before the IRS) must file a Form 2848, Power of Attorney and Declaration of Representative, with us it he or she hasn't already done so. You can find more information about representation in Publication 947, Practice Before the IRS and Power of Attorney.

We'll review your protest statement and decide if you provided a basis for us to reconsider our determination. It so, we'll continue to process your case considering the information you provided. It you haven't provided a basis for reconsideration, we'll forward your case to the Office of Appeals and notify you. You can find more information about the role of the Appeals Office in Publication 892, How to Appeal an IRS Decision on Tax-Exempt Status.

If you don't file a protest within 30 days, you can't seek a declaratory judgment in court at a later date because the law requires that you use the IRS administrative process first (Section 7428(b)(2) of the Code).

Where to send your protest

Please send your protest statement. Form 2848, if needed, and any supporting documents to the applicable address:

U.S. mail:

Internal Revenue Service
EO Determinations Quality Assurance
Room 7-008
P.O. Box 2508
Cincinnati, OH 45201

Street address for delivery service: 

Internal Revenue Service 
EO Determinations Quality Assurance 
550 Main Street, Room 7-008 
Cincinnati, OH 45202

You can also fax your statement and supporting documents to the fax number listed at the top of this letter. If you fax your statement, please contact the person listed at the top of this letter to confirm that he or she received it.

If you agree

If you agree with our proposed adverse determination, you don't need to do anything. If we don't hear from you within 30 days, we'll issue a final adverse determination letter. That letter will provide information on your income tax filing requirements.

You can find all forms and publications mentioned in this letter on our website at www.irs.gov/formspubs. If you have questions, you can contact the person listed at the top of this letter.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosure:
Publication 892

DOCUMENT ATTRIBUTES
  • Institutional Authors
    Internal Revenue Service
  • Code Sections
  • Subject Area/Tax Topics
  • Industry Groups
    Nonprofit sector
  • Jurisdictions
  • Tax Analysts Document Number
    2018-28111
  • Tax Analysts Electronic Citation
    2018 TNT 131-21
    2018 EOR 8-23
  • Magazine Citation
    The Exempt Organization Tax Review, July 2018, p. 147
    82 Exempt Org. Tax Rev. 147 (2018)
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